News In Focus
OFT investigates payday lending
The Office of Fair Trading (OFT) has launched an extensive review of the payday lending sector.
Partly prompted by concerns that some payday lenders may be taking advantage of people in financial difficulty, the review will investigate compliance with the Consumer Credit Act and the OFT's guidance on irresponsible lending.
Evidence gained during the review will be used to boost standards across the sector and to drive out companies that are not fit to hold consumer credit licences.
The OFT will focus on a number of issues, including:
- Giving loans without first checking adequately that the borrower can repay them;
- Inappropriately targeting particular groups of people with clearly unsuitable or unaffordable credit;
- Rolling over loans so that charges escalate and the loans become unaffordable;
- Not fairly treating borrowers that get into financial difficulties.
The review will involve on-site inspections of 50 major payday lenders, and surveys of industry and consumer organisations. Leading up to the review, the OFT has conducted a sweep of over 50 payday lending websites, and written to the main trade bodies outlining areas where it considers advertising standards need to be improved.
As part of the review, the OFT is conducting questionnaire surveys of key stakeholders including consumer credit licence holders, trade bodies, local authority trading standards service and consumer organisations including free advice providers.
Information obtained will be used to assess compliance levels across the payday lending industry, identify the reasons for non-compliance and will inform the OFT's overall compliance review findings.
The deadline for responding to the survey is Friday 18 May 2012.
The final report of the review together with information on follow-up action will be published later in the year.
Click here to access more information on the review, and the current questionnaire survey.